Increased global milk production caused U.S. dairy exports to slow significantly during the third quarter of the year and they are expected to slow even more during the fourth quarter.
However, cheese exports remain a bright spot for the U.S. industry and global dairy demand continues to grow.
U.S. dairy exports soared past record levels during the first half of the year but they hit a speed bump in the third quarter as global milk production continued to ramp up.
According to U.S. Dairy Export Council data, output from the world’s top five dairy suppliers — United States, European Union, Australia, Argentina and New Zealand — increased by 1.7 billion pounds a month during the last 14 months ending in September.
“This increased volume of milk turned out to be more than importers can consume,” USDEC Vice President of Communications Alan Levitt told the Capital Press in an email.
While world prices plunged as a result, U.S. prices remained high because of strong domestic demand and low stocks.
“Our competitors … have more product to sell, and they are willing to sell at a lower price,” Levitt said. “It’s a buyers’ market now. Hence, we’ve lost some volume.”
During the first half of 2014, U.S. dairy exports averaged 179,712 metric tons of volume per month, 14 percent more than the prior year, according to USDEC.
The third quarter monthly average fell to 156,109 metric tons, 13 percent below the first-half average and 11 percent lower than the same period in 2013.
The value of all U.S. dairy exports averaged a record $653.6 million per month during the first half of 2014, a 26 percent increase over last year. However, that value dropped to $565 million during the third quarter, a 14 percent decline vs. the first half and 6 percent lower than last year.
While 16.4 percent of U.S. milk production was exported during the first half, 14.7 percent was exported during the third quarter.
U.S. cheese exports declined 8 percent during the third quarter compared with the first half but they were 13 percent above the 2013 third-quarter total.
“A real silver lining in our global dairy trade has been the growth in U.S. fresh cheese exports,” said dairy economist Mary Ledman, author of the Daily Dairy Report.
USDEC expects U.S. dairy exports to decline 15-20 percent by volume and 25-30 percent by value during the fourth quarter, compared with a year earlier.
World prices are not expected to rebound until the second half of 2015, Levitt said.
“However, the long-term trend of robust dairy demand growth in emerging markets remains intact,” he said. “In addition, virtually every published analysis concludes that structural issues will prevent the world from producing enough milk long-term to meet this ongoing need. That’s going to require the United States to be a player and milk prices will have to reflect our cost of production.”
“The silver lining is that there is still great growth on the global dairy market,” Ledman said.
Source: Capital Press
